Naira falls to N500/$ after CBN adjusts exchange rate by N6

Nigeria’s currency on Monday fell to N500 to the dollar after the Central Bank of Nigeria (CBN) adjusted the exchange rate by N6 across foreign exchange market segments.

This is in line with BusinessDay projection last week that the naira could head to N500 to the dollar this week.

With the current rate, naira has lost N140 year-on-year when compared with N360 it stood in November 2019 and N1.25k day-on-day compared to N496.50k it exchanged with the dollar on Friday.

The persistent depreciation in the value of the naira is due to increase in demand for the dollar by the end-users amid a shortage of the greenback.

The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of Covid-19 pandemic.

At the Bureau De Change (BDC) segment of the foreign exchange market, naira weakened by N5 as the dollar sold for N500 on Monday as against N495 on Friday.

The current exchange rate at the BDC and the black market has defied the CBN’s FX adjustment where it directed the BDCs to sell dollars at N392 to the end-users.

Read Also: Naira falls to N496.50k on black market as dollar scarcity persists

Nigeria’s Central Bank at the weekend adjusted the rates by N6 across foreign exchange market segments. This is in a bid to unify the exchange rates as recommended by the International Monetary Fund (IMF).

In a circular signed by Nnaji O.S, director, trade & exchange department, International Money Transfer Service Operators (IMTOs) are to sell to banks at N388, which is N6 higher than N382 in August 2020.

According to the circular, effective November 30, 2020, the CBN will be selling dollars to Bureau De Change (BDC) operators at N390 and the BDCs are expected to sell at N392 to the end-users. This represents N6 adjustment compared to N384 and N386 respectively, in August 27, 2020.

Banks are to sell dollars to the CBN at N389, which is also N6 higher than N383 directed in August 2020 by the regulator. However, the CBN retained the $10,000 sales to each BDCs since August 2020.

The CBN has sold over $1.0 billion to BDCs since September 2020, in a bid to inject more liquidity and ease demand pressures. However, the volatility in the market remained persistent, said analysts at FSDH research.

Aminu Gwadabe, President, Association of Bureaux De Change Operators of Nigeria (ABCON) said forex speculators are taking huge risks with their funds, as the Central Bank of Nigeria (CBN) has enough financial muscle to defend the naira and close the widening gaps between official and parallel market rates.

Godwin Emefiele, governor of the CBN said after the Monetary Policy Committee (MPC) meeting on Tuesday that the black market is a shallow the market of only about five percent of the foreign exchange market which is patronised by people who go there for cash to offer bribes and corruption. Parallel market is the place where people who don’t want to provide documents go, he said.

“At the Investors and Exporters (I&E) window, the rate is about N386 or N387 / $1. We don’t control the I&E window. Why will anyone use the parallel market to say that the exchange rate is over N480/$1,” Emefiele said.